Letter: The root cause of high house prices is low tax
04-08-2021
Letter: The root cause of high house prices is low tax
From Alan Davison, London N5, UK
Regarding Martin Wolf’s column (“The UK’s housing is expensive and its supply must increase”, Opinion, March 22) I think the main reason that property prices have risen faster in the UK than elsewhere is because property taxes are so low in the UK. Numerous chancellors have ducked the issue with George Osborne probably being the worst offender. Instead of raising property taxes he raised transaction costs instead with his hikes to stamp duty. This led to older, asset rich, cash poor middle class house owners staying put in their large family homes despite the families having fled the nest, rather than downsizing to a smaller flat. If the UK had property taxes in line with the US where rates vary between 2.2 per cent and 0.3 per cent a year then the property shortage might well vanish quickly. If one uses an average US tax rate of 1 per cent per year then a £4m Georgian townhouse in Islington would attract tax of £40,000 per year compared with current levels of less than £4,000. Two things would happen overnight. Firstly half the houses in my road would be up for sale and secondly prices would tumble. All political parties know that this is the case but none have so far dared to press the button.
Alan Davison London N5, UK